Dividends and Corporation Tax

[joon1]

Firstly help me get into my thick head procedure please.
Okay I know Corporation tax is due 1 year 9 months after initial start-up it is 20% after salary expenses etc. Okay I paid myself divvies 3 months after starting company lets say for example after deductions net profit £12000 okay set aside 20% for tax £2400....now say I pay £8000 divvies, I leave in £1600 in company..with me so far?? The 20% corporation tax £2400 is it best if I take out and leave to the side as I'm now confusing myself the next time I'm going to pay divvies, I take it this comes off what I have now as net profit. So for example I now have £15,000 net profit 3 months later to calculate what to pay myself now I must take away the £2400 first...thanks in advance!!

[r0bly0ns]

Yes, you are correct.

We have set up a company savings account for this, when we declare a dividend we move the relevant corporation tax into the savings account.

All this savings account contains is tax due (Corpt tax & VAT), so it is simply not included in any of our interim profit calculations.

But don't forget to account for the interest you acrue on this account

[Sockpuppet]

Sort of.

You don't take £2400 from your net profit.

Easier way is to do a running total.

Say if you earned 10k profit every 3 months.

Month 1 -3: 10k profit, 2k tax, div 8k

Month 4 - 6: 20k profit, 4k tax, div 16k (8k already paid).

Month 7 - 9: 30k profit, 6k tax, div 24k (16k already taken)

So in this case just work out the max div you could pay on profits to date...minus divs already taken.

Don't start taking £2400 away from £15k as it'll get complicated. Also you must remember to look for profit in the whole year. If you take divis upto the hilt and your contracts goes TU then you wont have the profit to cover them

[VectraMan]

I always look at the whole year. So any time I work out dividends I work out sales - costs for the year so far, then 21% of that is CT and the rest is the total dividend for the year. Subtract the dividends you've already paid, and you've got the amount you can pay now.

I think that's simpler and has less potential for screw up than trying to work out dividends monthly.

[Lewis]

21% of that is CT

21% ? That's next year is it not?

[malvolio]

21% ? That's next year is it not?

If you assume three week's time is next year, then yes. It's 20% at the moment. Isn't it??

[joon1]

Thanks guys I've worked out CT will be about 12k so just need to bear it in mind..I take everyone is different regarding putting it aside or paying up at the last chap.